Location is key. A valuable location, a strategically situated piece of land or building, is at the mercy of a number of factors, including the economy, public perception, zoning laws, neighborhood, etc. A savvy investor will know the market and take advantage of potentially lucrative opportunities. There are a sequence of steps a commercial real estate investor may want to consider as they begin to grow their investment knowledge.

Small Apartment Complex

For the first-time investor, after purchasing your own home, the next step would be to consider a small apartment complex. You could live in one of the units, purchase the property using owner financing, decreasing the down payment amount. A small apartment complex also affords you the opportunity to learn how to manage property.

Land

Raw, unimproved acreage such as farmland or a vacant city lot may not be a lucrative short term investment as there is no immediate cash flow return and if the land remains idle, there could be out-of-pocket costs such as taxes, insurance and maintenance. However, as population grows and cities expand, having a piece of land on what was once the outskirts of the city could be an excellent long-term investment.

 

Build-To-Suits

This is a land or property owner that offers to build or convert his property to meet the unique requirements of a particular tenant. This is done a couple of ways. One is for the tenant to supply his plans and specifications to the landlord, who in turn has his or her contractor give an estimate of the cost of construction. Alternatively, the property owner can let the tenant build to his specifications while the landlord finances the cost of construction.

Shopping Centers
There are two main types of shopping centers: Anchored and unanchored. Anchor refers to the main tenant such as a supermarket or major department store that occupies the largest area within the shopping complex. It is the main draw that indirectly generates business for other tenants in the shopping center. Anchored shopping centers are relatively easy to manage because the responsibilities of the landlord are limited to grounds and structural upkeep, management, insurance and real estate taxes. The tenants themselves are responsible for interior construction, upkeep and repairs.

Strip centers or malls are a series of retail stores usually located on the perimeter of a densely populated neighborhood. They are located on a heavily trafficked commercial street with good visibility and easy access. They represent a smaller investment than an anchored mall and there is no risk of the departure of a major draw tenant. They are also easier to manage because of their smaller size. However, a strip mall must be well located. Also, smaller tenants tend to have shorter life spans causing a high vacancy rate. Make sure there is a good mix of stores that complement each other.

Condominium Stores
These are retail spaces located on the street level of apartment dwellings that service the building itself, but also draws street traffic.

Office Buildings
These are similar to apartment buildings, but are more service intensive. The owner pays for the building electricity, heating, ventilation and air conditioning as well as internal repairs. Income from office buildings increase with strong economic conditions with more demand for office space, however in economic downtimes, vacancies and lower rents mean lower income. Prices of office buildings fluctuate with widely in relation to the condition of the economy. Investing in an office building is a large undertaking, one usually better left for experienced investor groups until one is more knowledgeable about managing properties.

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